There are some downsides. First of all, the maps aren't on your iPhone -- they are loaded dynamically as you drive, via your 3G data connection. That's fine if you are in an urban area with good 3G coverage. If you're not, you'll have a nice icon representing your car, and nothing else.
Even though having complete maps loaded on your phone takes a lot of storage space, it can be a lifesaver. I think Garmin erred on this decision, but depending on where you live and drive, it may not be a big deal to you. Even if you can live with streaming the maps, I found the app slow to display them, even in five-bar signal conditions.
Further, the voice quality of this app is horrible. Think 1940s AM radio with a bucket over the speaker. It seems a major misfire by a company that almost single-handedly invented the personal GPS. I'm sure it can be fixed, especially since Garmin's competitors sound just fine.
There are some other slip ups. The app will warn you if you are exceeding the speed limit, but it's a visual warning. I don't want to have to look at the screen when I drive. Surely an audible alarm wouldn't be too hard. That's what Navigon does, and it works well. Update: Garmin reports the app has an audible warning. I couldn't hear it on a busy highway at high speed, but when the phone was turned all the way up and I was in quieter conditions I could hear it easily.
Routing and directions seemed no better or worse than other navigators. As they all have a bias for major streets, you may do better using your own local knowledge. On the other hand, if you had good local knowledge, you probably wouldn't be using a nav app.
I thought the app was a fine first step for Garmin, but at $5 more than the top-rated Navigon, it seems a bit pricey. Traffic is free, instead of an add-on purchase, but Navigon has far more features.
The lack of on-board maps is a non-starter for me, and the voice quality simply has to be fixed. If you are used to the Garmin way of doing things, and if you live in an area with constant 3G coverage, it could be a good option. For others, I'd suggest waiting to see if Garmin fixes the audio quality and gives you built-in maps.